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The consensus on Wall Street is that direct-to-consumer darling Allbirds, known for its eco-friendly sneakers made from wool and sugarcane, “lost its way” after a series of new products failed to connect with consumers. Look no further than its since-discontinued wool leggings, which some customers complained were see-through.
Allbirds is trying to get back on track, and it appears to have made some progress in Q2. While net revenue fell nearly 10% year over year, analysts expected worse. The company has lowered costs, reduced inventory, and increased cash flow, making progress on an ambitious transformation plan revealed earlier this year.
Fancy footwork: While Allbirds’s success could hinge on whether it can produce another hit along the lines of its iconic Wool Runner, the macro environment may never be as forgiving as it was during its early years. Like fellow DTC brands that exploded in market value over the 2010s on the back of a tidal wave of venture capital, Allbirds is now prioritizing profitability and financial sustainability over rapid growth. On the ground, that means playing it a bit closer to the chest when it comes to marketing new products.
For example, Allbirds is planning a more modest release for its upcoming “zero-carbon shoe,” M0.0NSHOT, due out in spring 2024. “While small in volume, we anticipate this project will pave the way for important collaborations that have the potential to catalyze momentum in 2024 and beyond,” co-founder and CEO Joey Zwillinger told investors.
He added that Allbirds is trying to keep its inventories tighter overall, as it comes off a period of margin-squeezing promotions. In addition, the company is pursuing more partnerships with wholesalers and a slower build-out of brick-and-mortar stores.
Polly Wong, president of Belardi Wong, a marketing firm with a large portfolio of DTC brands, told Retail Brew that DTC brands face a “trifecta of headwinds,” including increased competition, a slowdown in consumer spending, and market saturation.
“They did a lot of the right things over time,” she said of Allbirds. “There’s just so many more brands and competitors out there.”—AV